Potential signal:
- On a daily close above the 1.16 level, I am buying the EUR/USD pair with a stop loss at the 1.1470 level.
- I would be aiming for a move to the 1.19 level.
The euro has been slightly negative during the trading session on Tuesday against the US dollar, but when you look at the totality of trading action, we continue to watch the 1.16 level with interest, as it is a major barrier above. As long as we stay below that level, I would anticipate that there is going to be a lot of choppy behavior.
However, I also recognize that there is a very crucial event coming on Wednesday that will certainly have a major influence on what happens not only in this currency pair, but multiple currency pairs around the world.
Wednesday Session
Keep in mind that the Wednesday session features the FOMC Statement, as traders will be waiting to see whether or not the FOMC says something along the lines of a hint as to where they are going next. After all, traders are starting to price in the possibility of 2 rate cuts later this year, specifically starting in September. Whether or not that actually ends up being the case remains to be seen, but I think at this point in time the market is trying to trade with that assumption. The Federal Reserve cutting interest rates of course works against the value of the US dollar in general, but we also need to keep in mind that it’s very possible that the market is wrong. This is why the statement is going to be so important, and why the market will be so volatile 8 during the day on Wednesday.
If we can break above the 1.16 level on a daily close, then we will have seen a major shift in attitude. However, I’d be very cautious about trying to take that signal until we actually close like that, because liquidity will be a major issue, and you could see the euro spend a little bit of time above there, only to turn around and serve falling again.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
